IBM shrinks Cell to 45nm

Good news for Sony:

The 45nm Cell will use about 40 percent less power than its 65nm predecessor, and its die area will be reduced by 34 percent. The greatly reduced power budget will cut down on the amount of active cooling required by the console, which in turn will make it cheaper to produce and more reliable (this means fewer warrantied returns). Also affecting Sony’s per-unit cost is the reduction in overall die size. A smaller die means a smaller, cheaper package; it also means that yields will be better and that each chip will cost less overall.

This means that each PS3 will be cheaper to produce, giving Sony more leeway to either make a profit, pass savings on to consumers, or both. No matter what Sony decides, this is good for Sony and hopefully it’ll also be good for us in the form of a price reduction.

Manufacturing cost reduction is a core competence at Sony. They also have a new BluRay laser diode in the PS3 and have stripped out backwards compatibility and a load of other features.
They are gearing up for a price war with Microsoft.